It's essential to ensure that property is the right investment vehicle for you and to choose a property and type of let that aligns with your financial objectives.

We've compiled 8 essential things that every new landlord should consider before investing in rental property.

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What are your investment objectives?

Are you primarily seeking a monthly income from rental profits, or are you more interested in building up equity for a lump sum return in the future? Do you want an asset to pass on to your children, or perhaps something they can live in later? It's crucial to be clear about the type of returns you want and when you expect them.

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Where is the best place to invest?

Most landlords tend to invest locally—within about 30minutes of their residence. There's no strict need to chase 'hotspots,' as once they are identified, the best growth is often already priced in. The good news is that good rental investments can be found all across the country.

What type of property should you invest in?

Your choice should be guided by the current and future supply and demand in your local area. Remember, this isn’t about your personal preferences; it's about what tenants are looking for and what kind of property will help you achieve your financial objectives.

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What type of tenant and let should you target?

This decision also depends on supply and demand, so consult with qualified local agents and conduct online research to identify where the highest demand lies. Your choice will also be influenced by your objectives. For instance, if a three-bedroom house aligns with your long-term goals, your target market might be families seeking unfurnished accommodation. If your focus is on rental income, you might consider offering furnished flats or HMO rentals to professionals or students.

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Costs associated with a rental property‍‍

Beyond the deposit, the most significant expense is the 3%higher rate stamp duty (4% in Wales), which applies to any property purchased in addition to your primary residence and is applied to the entire price of any purchase over £40,000. For example, if you're buying a rental property for£280,000 in England, the stamp duty would be:

£1,500 standard rate (£30,000 x 5%)

£8,400 higher rate (£280,000 x 3%)

Total: £9,900 – though this can be deducted from any capital gains when you sell.
Then you must meet various health and safety requirements and ensure the property adheres to legal standards, such as gas and electrical safety checks. The necessary expenditure will depend on the property's condition, so be awareof these costs too before purchasing.

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Legal Responsibilities

If you manage the lettings yourself, it's crucial to understand your legal responsibilities and obligations. You must also stay updated on legislative changes. Unintentional legal violations can result in severe penalties which is why many landlords choose to use a letting agent.

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Deposits

Be aware of the maximum deposit allowed under the Tenant Fees Act and know how to protect it correctly in a government-approved scheme.

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Tenant’s right and issues

Every tenancy should have a written agreement, typically an assured shorthold tenancy agreement (AST) for private residential tenancies. Understand your and your tenant's rights and responsibilities, and be aware of which clauses you can or cannot change and enforce.

Whether your tenant has queries, falls behind on rent, or causes problems, you must handle these situations professionally and legally .If we manage your property, we take care of tenant issues on your behalf. Our Premier Service also covers legal costs for landlords if tenant disputes go to court.

If you’d like to discuss whether investing is right for you and explore your options, our local experts are here to help. Contact your local Leaders branch to get your questions answered and find the right investment property for your needs.